There is no harm in asking for a better oil contract deal

Aug 14, 2020 Letters

Dear Editor,

I write to commend President Irfaan Ali for demonstrating leadership. Indeed, it takes courage to order the Payara approval put on hold. Now make it conditional on a review of the 2016 Contract that was signed in secret by former Minister of Natural Resources Raphael Trotman and kept secret for over a year.
In the recent election campaign, speakers of the now ruling party promised, “If elected, we will renegotiate the Contract”. Many speakers also cited the Global Witness Report in their campaign speeches (GWR says the Guyanese nation stands to lose $55 billion on that 2016 contract). The PPP government is locked in – they cannot run away from their promises. And, most importantly, they do have a clear mandate from the Guyanese people to renegotiate the contract.
On Wednesday night, I attended an online OGGN meeting to hear Dr. Jerry Jailall, professor at a South Carolina University say he had attended several PPP election campaign rallies and witnessed promises of renegotiation being made to the Guyanese people. To that, Dr. Dhanpaul Narine added: “If the promise is stated in the party’s manifesto, then President Ali has a duty to fulfill that promise”.
I say to President Ali: Do the right thing today. Write a letter to ExxonMobil CEO Darren Woods, asking him for a sit-down meeting of the two sides to review specific items in the Contract.
Some of those items should be:
(1) 2% royalty is practically unknown in the business. (Average royalty around the world is 8% – 15%)
(2) ExxonMobil must pay corporate income tax on profits. There is no good reason for exemption. EM pays income tax in all other countries.
(3) Better protection for the environment. Not one cubic foot of gas should have been flared. Need a pipeline to transport the gas to shore, then build it even if it costs $5 billion.
(4) 75% of the workforce must be Guyanese. Oil Company must provide the training.
(5) “Front Loading” in favour of Oil Company needs adjustment. Ring-fencing of costs must be considered. For untold years, “the only take” for the GoG will be 12.5% + 2%; this is unconscionable for a nation whose majority population struggle for daily survival needs.
There are two constituencies here: shareholders of a supergiant company, and the 75% of Guyanese people who live on $2 – $3 a day. One side is shafted in this contract. There is an overwhelming need for a fairer deal.
Why do some folks fear to ask the giant oil company for renegotiation? Would the oil company scuttle the deal, pack up and leave? Would it weaken investor confidence in the country? These questions have been debated in the popular press before – and all the pundits say there is zero chance of EM packing up and leaving.
How will CEO Darren Woods respond to a letter asking for a review of items in the contract? He can say yes; or he can say ‘No deal. I have a signed Contract’. If he were to say no, that is not the worst thing in life; it is not a loss of face on the part of GoG. President Ali will have tried to get the oil company back to the table. His first duty is to the Guyanese nation, which he leads. Asking for renegotiation is not confrontation, not threatening. There is nothing to suggest that the oil company does not want a fruitful and productive relationship.
The Production Sharing Agreement has been defined as a partnership between the host country and the oil company. Dr. Jan Mangal calls it “a marriage. Neither side wants friction in the relationship”.
Yours truly,
Mike Persaud